Merkel defeat: It's the euro, stupid

During Bill Clinton's successful 1992 presidential campaign, his chief political strategist, James Carville, hung a sign in the campaign headquarters reading, "The economy stupid", to remind everyone that the election would be won or lost on George Bush senior's economic record.

It's a rule of thumb that holds true for most elections, but not always. John Major famously won the UK general election of the same year into the face of an even more serious recession than the one out in the US.

Conversely, we now have Angela Merkel's Christian Democrat Union suffering a humiliating defeat at the hands of the Greens in one her most important regional strongholds, Baden-Wuerttemberg. Her electoral setback, the latest in a run of them, had virtually nothing to do with the German economy, which for the time being is the poster pin up of Europe with unemployment below pre-crisis levels and output surging back. The German economy has again entered one of its golden phases.

For this, Ms Merkel gets no credit at all. Her fortunes have instead been determined by events in Japan, which have hardened Germans' traditional anti-nuclear tendencies, and in the fringe economies of the eurozone, which have ignited eurosceptic feeling.

The upshot of these elections is that whether the German chancellor likes it not, she will become more reliant on support from opposition parties, which in turn will feed uncertainty about German support for further eurozone bailouts. European solidarity has always been more of a political than a popular movement, and no more so in Germany, which is arguably at root even more eurosceptic than Britain.

Germans were denied a referendum on the euro, and with good reason; they would have rejected it out of hand if allowed one. Understandably, they now balk at the idea of having to bailout the profligate peripheral economies. Merkel is being punished for her "I'll do whatever it takes" stance on saving the euro. Her political room for manoeuvre has been further eroded.

UPDATE: 12.50. I see from many of the comments below that very local issues, including the "Stuttgart 21" railway station, also played a substantial role. As with UK by-elections, state elections don't offer much of a guide to what would happen in a national election. None the less, I'd be feeling none too comfortable this morning if I were Ms Merkel.